The shift to alternative energy sources is already creating pent-up demand for critical minerals. Given this, deep sea mining could be necessary in order to extract these minerals to meet demand.
The challenge, according to a Financial Times article, is finding ways to obtain critical minerals without upsetting the environmental ecosystem. Despite the potential consequences it could have, it’s still a viable alternative. It could turn dire as the shift to critical minerals starts to gain more momentum.
“Deep-sea mining advocates say the transition is needed because terrestrial mining cannot meet the demand for metals vital to batteries, wiring and other hardware key to the shift away from fossil fuels,” the FT article said. “The boom in electric cars and grid batteries resulting from the push to meet the Paris Climate Agreement means mineral demand is set to increase fourfold by 2040, says the International Energy Agency.”
Furthermore, deep sea mining could be the answer to prevent reliance on nations for critical minerals such as China. Right now, the second-largest economy essentially has profound control in accessing these critical minerals.
“China dominates global supply chains for nearly all critical mineral resources,” a RAND blog explained. “Especially important are elements such as nickel, cobalt, lithium, copper, and the rare earths that power decarbonization technologies such as batteries, electric motors, and turbines.”
Spiking Demand Creates Opportunity
As the world transitions to more alternative energy sources, the demand for critical minerals will spike. As such, a growth opportunity exists for the Sprott Energy Transition Materials ETF (SETM).
The fund seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Energy Transition Materials Index, which is designed to track the performance of a selection of global securities in the energy transition materials industry.
Per the Sprott product website, the fund offers:
- Pure-play access to a range of critical minerals necessary for the global clean energy transition.
- Potential for explosive growth as the government looks to achieve its net-zero goals. Globally, $1.11 trillion flowed into the energy transition sector in 2022. To meet net-zero targets, global investment may need to accelerate to a yearly average of $3.9 trillion 2023–2030.
- Exposure to well-positioned companies that are upstream in the supply chain and may benefit from the increased investment in minerals critical to the energy transition.
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